All Forum Posts by: Stephanie Medellin

Quote from @Cody Anderson:

Quote from @Bryan Maddex:

@Archie Barrett

Just wanted to say that there are MANY reasons to consider a DSCR loan vs a conventional loan, not ONLY if you do not qualify for a conventional loan due to DTI.

Possible DSCR Benefits:
Can do cash out refi prior to 1 year seasoning of the mortgage
Can do cash out refi with no seasoning of ownership (with some lenders)
Can do a loan with much less paperwork (this comes more into play every time you add a property)
Can close on a DSCR loan directly in your LLC
Can have your DSCR loan not report on credit (depending on the lender)
DSCR loans can be cheaper than conventional loans for many credit scores and down payments. If you are not shipping DSCR loans every time you are making a purchase, you may be paying too much.
DSCR Loans can do 15% down with no mortgage insurance. Could be a savings depending on the scenario. 
DSCR Loans can finance property types that conventional loans cannot (non-warrantable condos, condotels, unique properties or mixed use properties...)
Jay was going to say those things as other Ifs i am pretty sure!

 Is the 15% down with no insurance allowed because it is inferred that the tenants will have renters insurance?

This is referring to mortgage insurance, also called PMI, private mortgage insurance. It insures the lender against the borrowing defaulting on the loan. It is paid by the borrower.

Property insurance will always be required in case something happens to the property itself.  Even if a tenant has renter's insurance, the tenant's policy only covers the tenant's personal property.  The landlord always needs insurance to cover the building / home if it's financed. 

Yes, it's standard across most loan types to be able to do a cash out refinance, even if there isn't currently a mortgage on the property.

No reason to think that builders won't agree to cover the buyer's agent fee.  It's a standard cost of doing business for them.

Yes!  Most lenders will gladly talk to you to help you start planning a purchase.  The best thing to do is have a conversation with a broker or lender (or a few brokers or lenders), see who you like working with and get a rough idea of how much you would qualify for based on verbal information.  This is easier for someone who earns a fixed salary, no overtime, no complicated pay structures, not a business owner, etc.   

You can also fill out an application, submit your documents (income, assets, etc), and get pre-approved.  This will allow you to shop for properties more easily, and will also make it easier to run different scenarios for different properties that you view.

The best way to prepare is to have your income for the last two years and YTD available, know how much you have available to spend, and write down any questions you want to ask.  

They should be able to give you a rough idea of an interest rate (of course interest rates change daily) based on estimated credit score, purchase price, down payment amount, location, loan type, property type, etc. 

All of this is necessary before looking at properties because you need to know how much you can borrow, how much you need to put down, and approximately how much you will make from each potential rental.  

Do you absolutely need cash out?  You can potentially qualify for a regular rate & term refinance of the 91k loan (plus closing costs) within 12 months.  

You could also start your transaction ahead of the 12 month mark and plan to close right at the end of the 12 months for a cash out refinance.  You don't have to wait for 12 months to pass to apply for the new loan.  You just can't close before 12 months is up.  You can talk to your new lender to plan your closing around this timeline.

I see a lot of posts mentioning DSCR loans, but if you're buying a primary residence, a DSCR loan cannot be used. DSCR loans are for investment properties only.

For traditional conventional financing, you won't be able to document short term rental income with AirBNB or VRBO reports.  While you could be granted an exception to use a 12-month lease if the property was acquired mid-year, it doesn't sound like you have an annual lease if you rent on a shorter term basis.  

Some lenders will average out a partial year of rental income from your tax returns if you cannot provide a lease.  It will be averaged over 12 months, which will help offset some of the expenses, and may or may not be enough to qualify for another property.  This will depend on the rest of your financial picture.  

Non-QM loans may be an option for you to qualify with short term rental income.  

Conventional loans to purchase (1-4 unit) investment properties don't require a personal financial statement.  The loan application will ask about the assets you need for the purchase (down payment, closing costs, and reserves), and you will need documentation for those accounts (most recent statements).  Your credit report will show your payment history and outstanding liabilities.

Commercial loans may ask for a personal financial statement.  

What specifically are you looking for in a "house hacking" loan? Most lenders have loan options available under 10% down for purchasing a primary residence - these are standard conventional and FHA programs. You can live in one room and rent out the other bedrooms to roommates in your house, but in most cases you won't be able to use that "boarder income" to qualify. That just means you need to qualify with your own personal income.

Thank you so much for posting this.  So many are under the impression that because a loan doesn't report on your credit, it doesn't count or doesn't have to be disclosed on a new loan application.  

Quote from @John Currey:

I recently talked with a mortgage broker and me and my wife didn't qualify for a loan on  an investment property. I'm honestly surprised, right now our only debt payment is a 857 mortgage, no car payment no student loans no credit card debt, and good credit 740's. she doesn't make just a lot (41k a year) but with the 857 mortage payment, her debt to income shouldn't be much over 25%. Would we not qualify for a 55k loan? 

With the very basic info provided, it sounds like your wife has a chance to qualify for a conventional investment property loan.  This is not considered a commercial loan.  I think you will find more conventional lenders that will offer smaller loan amounts than DSCR lenders.  DSCR lenders usually have minimums of at least 75k.  If the loan amount is the issue, can you find a higher priced property?  If she doesn't qualify with that particular lender, they should be explaining WHY.  The why will help you adjust course so that you can learn what you need to do to qualify - either for a different property, or in the future.  If the reason is particular to that lender, you can search for a lender that may not have the same restrictions.